My portfolio – November update

These last few weeks have certainly been interesting and now Donald J. Trump is the president elect of the United States.

I was honestly expecting the markets to dive following his unexpected win. That was mainly due to the element of the unknown Trump adds to the proceedings. There was certainly a lot of volatility in the days following his election but the overall trend was up. It was an interest rally; the overall market was up but there was a big share of big winners and big losers in the aftermath of the election. It wasn’t uncommon to look at the biggest gainers and the biggest losers for the day and see a lot of big 10% swings in either direction.

It seems to me that the market now deems the Trump presidency as something of a positive especially for some industries. The idea that increased Trump spending will lead to higher U.S. GDP growth and higher interest rates certainly took hold of the market early on which led to overall gains punctuated by big gains in certain sectors and big losses in others.

Defense and infrastructure stocks soared due to the expectations of higher government spending in those areas. Energy, banks and some healthcare stocks were up too due to the belief that the Trump administration will mean less government intervention in those industries. Frank-Dodd and the ACA are just two of the many regulations that are in the cross hairs of the Trump administration and the market punished and rewarded quickly based on those assumptions.

The other side of that coin were the industries that benefit from those regulations as well as the ones that benefit from low interest rates. Renewable energy and some healthcare companies that benefit from the ACA saw their stock prices fall. The idea that interest rates might go up quicker under a Trump administration due to higher GDP growth and infrastructure spending sent high yield names down quite a bit as well. REITs, Utilities and other dividend payers that have seen quite a run up in the last few years due to the search for yield saw a retreat as the market moved into other areas. Foreign stocks were also hit due to the fear of the unknown around Trump’s promise to renegotiate trade agreements with a renewed focus on America.

Those of us who are mainly invested in index funds saw a surge in US equities and a fall in foreign equities as well as a move out of yield in general but the overall trend was up. It was certainly a tougher week for those that are heavily in individual securities as you either won big or lost big depending on which sector weighing you had.

One thing to remember is that this is just a gut reaction to what the market thinks will happen. This is no indication of long term results. There are sure to be plenty of opportunities in the days to come as people re-position money out of stocks that they think might do poorly into ones that they think might do well. I think I’m more likely to look in the direction of companies that people are running away from for potential bargains as there’s one thing that’s certain; there is no certainty about anything.

At the end of the day – this type of week made me glad that I follow this type of investment style. I saw many names up a lot and many names down a lot but it didn’t matter to me as most of my money is in index funds that represent the whole market. I was pretty damn sure that a Trump election would mean a short term market drop and I was completely and utterly wrong which is why I don’t try my hand at timing the market. My diversification meant that while some of my asset classes dropped(foreign, REITs, bonds), others thrived(US) so I was up overall. I can now allocate future money towards those classes that are underweight and potentially undervalued.

I still think the market right now has too many overvalued securities making it hard to focus on any individual names. The recent post-trump drop in a few names has created some opportunity I’ll be looking out for but I’m not all that sure that we’re anywhere close to being done yet. The volatility in certain sectors was very impressive as even large house hold names saw big daily drops that were worrisome. These types of moves seem to indicate that the market sees the Trump administration as much different than the Obama administration. The winners during the last 8 years may turn into losers in the next 4(or 8) years depending on the policies implemented which adds additional risk to any individual securities I might look at. The issue I see is that it’s unclear at this point what those might be as the Trump administration hasn’t even started yet and many have already decided the winners and losers.

I’ll be on the lookout for individual names that interest me but this type of volatility might mean I need to see some real appealing values to get in on some individual stocks until we get some certainty around what the Trump presidency actually means for America.

Let’s take a look at how my portfolio is shaping up!

It’s almost been a year since I started tracking my portfolio size and I’m happy where things are headed. This is a long-term game and any short term volatility doesn’t bother me too much. The market has been rather static in the past few months as I’ve barely moved the needle since August despite additional contributions but that’ll happen from time to time and often for long periods of time.

My portfolio now stands at $349331.37.

That’s an improvement of 0.62% over last month versus 0.17% for the S&P 500.

My taxable accounts were up 3% this month as some of my individual stocks performed well. My tax-advantaged accounts were down 1% and were hurt by poor performance from REITs and the foreign sector.

Cash was down around 1% as I bought some shares of ETFs during the month. My cash pile continues to shrink and makes up 8.8% of my overall portfolio right now. I’ll continue to buy additional share of some ETFs in my taxable account but plan to hold the money on the sidelines until I see some real values emerge on an individual basis.

October dividends were light but even a small amount reinvested will help future growth.

Let’s take a look at the asset allocation which has changed quite a bit this month.

Lots of changes here due to how the market performed in the past few weeks. US large caps which were under target are suddenly above and foreign, REITs and bonds see shrinkage. That means a change in future contributions is now needed as all my money had been going to US large caps and REITs to fix those deficiencies.

The struggle I have is that my 401k which sees a large % of my overall contributions doesn’t offer a REIT fund making reallocation there a struggle. My 401k does offer an option to link to a broker account so that’s something I may have to look at soon to fix that issue.

Here’s a breakdown of where each asset is versus target this month.

  • US Large Cap at 42.7% versus 42.5% target(+0.21%)
  • US Mid Cap at 10.7% versus 10% target(+0.71%)
  • US Small Cap at 10.3% versus 10% target(+0.32%)
  • US REIT at 8.2% versus 10% target(-1.8%)
  • International Developed at 15.1% versus 15% target(+0.08%)
  • International Emerging at 4.7% versus 5% target(-0.31%)
  • US Bonds at 8.3% versus 7.5% target(+0.78%)
REITs keep drifting further away despite all of my recent contributions outside of my 401k going to REITs. My non 401k contributions lately have been low due to higher expenses and REITs have also under performed leading to this situation.
The plan to fix this is twofold. First, I want to look into connecting my 401k to my brokerage account and see if I can make some REIT contributions there. I can see this being a continuing issue in the future with other asset classes as my 401k options are pretty limited and my contributions into that account are high.
The other is to make my future ROTH IRA contributions entirely into REITs when I have the financial flexibility to do so which will be sometime in December or January. That should help fix the issue and with the brokerage account connection give me more flexibility in reallocation decisions going forward since I won’t be limited to just the options in my 401k. That means I can better target my 401k contributions towards needed asset classes but can still benefit from the tax-advantaged account structure.
The plan for next month is as follow:
  • Setup brokerage account connection to 401k
  • 401k contributions fully into international fund
  • ROTH IRA contributions fully into US REIT
  • Move some additional bond money into US REIT
  • Cash pile at 8.8%. Invest in taxable ETFs and look out for fairly valued securities.
The asset allocation is almost there. REITs are the problem child and may continue to be if the yield names continue to see some pain in the near term.
That’s it for the update. I’ll have a savings rate update in a few months as well as a post on HSAs I’ve been working on for the past few days. The goal is to start writing more articles on this blog and do some more stock analysis now that work is slowing down. In fact one of the many plans I have for next year is to get more active on this blog.

2 thoughts on “My portfolio – November update

  1. Thanks for sharing your monthly update. REITs have been down. If a rate increase happens next month, we should see a nice dip in REIT values. I'm holding some cash back for this is case of a blood bath.

  2. Hi timeinthemarket,

    You're sooo close to $350k; it's awesome seeing your balance grow higher!

    I'm considering to eliminate REITs entirely from my Retirement portfolio (well not entirely since they're partly represented by Total Stock funds). I currently only have a 5% allocation which isn't enough to make much difference and I think I'm going to stick with a standard three-fund portfolio. I've not looked at the balance, so I don't know if they're up or down – I just want to simplify my asset allocation.

    Do you automatically reinvest dividends back in their respective funds or do you funnel them towards underweighted asset classes?

    Best wishes,
    -DL

Leave a Reply